Suppose the corporate tax rate is 40%. Consider a firm that earns $1000 before interest and taxes each year with no risk. The firm's capital expenditures equal its depreciation expenses each year, and it will have no changes to its net working capital. The risk-free interest rate is 5%.

a)Suppose the firm has no debt and pays out its net income as a dividend each year. What is the value of the firm's equity?

My ans

Ct = 40%

Rd = 5%

a) Vu(Unlevered equity value) = Net income - Tc (Corporate Tax)

Vu = 1,000 x (1,000 x 0.4) = $600

I looked up the ans and it divide $600 by 0.05. May i know the reason behind doing this?